Accounts receivable turnover ratio: This is an efficiency ratio that indicates the conversion of the accounts receivable into cash. This ratio is calculated by dividing the Net credit Sales by the Average accounts receivable. The formula to calculate this ratio is as follows: A c c o u n t s r e c e i v a b l e t u r n o v e r r a t i o = N e t c r e d i t S a l e s A v e r a g e a c c o u n t s r e c e i v a b l e To Indicate: The reason of difference in Accounts receivable turnover ratio of both the companies.

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Chapter 9, Problem 7CDQ

To determine

Concept Introduction:

Accounts receivable turnover ratio:

This is an efficiency ratio that indicates the conversion of the accounts receivable into cash. This ratio is calculated by dividing the Net credit Sales by the Average accounts receivable. The formula to calculate this ratio is as follows:

Accounts receivable turnover ratio = Net credit SalesAverage accounts receivable

To Indicate:

The reason of difference in Accounts receivable turnover ratio of both the companies.

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